- At the request of Germany, the preamble of the agreement makes now clear that, as of 1 March 2013, struggling eurozone countries will be allowed to apply for a bailout under the eurozone's permanent bailout fund, the ESM, only if they have ratified the 'fiscal pact'. The previous version only required that countries incorporate the balanced budget rule.
The new draft gives the European Commission a greater role, compared with the previous version. In fact,
- The Commission will set out "common principles" on the establishment of the national corrective mechanisms which, under the agreement, should be triggered automatically every time governments fail to comply with their deficit targets;
- Furthermore, the Commission is now allowed to issue a report on whether governments have correctly transposed the balanced budget rule into national law on its own initiative (under the previous draft, it needed to be "invited" to do so by a member state);
- More importantly, if the Commission's report concludes that a country has failed to transpose the balanced budget rule properly, "the matter will be brought to the ECJ by one or more of the Contracting Parties." In other words, a government can only be taken to the ECJ by its peers, at least formally. However, what the Commission says in its report plays a key role in the process.
In regards to the ECJ, its jurisdiction remains limited to Article 3(2), i.e. how national governments implement the balanced budget rule. But some very relevant changes have been made in Article 8, in particular:
- If a member state fails to comply with the first ECJ ruling (see above), it can be taken to the ECJ again. If the ECJ confirms that the government concerned has actually ignored its previous ruling, it can now impose a fine (no more than 0.1% of the country's GDP);
- Interestingly, under the latest draft, the fines "shall be payable" to the eurozone's permanent rescue fund, the ESM;
- In addition, a new paragraph has been added, which makes clear that Article 8 "constitutes a special agreement between the Contracting Parties within the meaning of Article 273 of the Treaty on the Functioning of the European Union".
What does that mean in practice?
This new paragraph really reads like an insurance against any possible objections from the UK regarding the use of the ECJ outside the EU Treaties. For those who, unlike us, do not remember the Lisbon Treaty by heart, this is what Article 273 says,
"The Court of Justice shall have jurisdiction in any dispute between Member States which relates to the subject matter of the Treaties if the dispute is submitted to it under a special agreement between the parties."
Therefore, this small paragraph makes the use of the ECJ (albeit still limited to a legislative rather than enforcement role) 100% legal under the EU Treaties.
One last thing is worth noting. Following suggestions from the Polish government that Poland might decide to stay out of the agreement in the end, unless non-euro countries are allowed to be present at future meetings of euro leaders, the latest draft establishes that:
- Non-euro countries that decide to sign up to the agreement must be kept "closely informed of the preparation and outcome" of eurozone summits;
- The leaders of non-euro countries must be invited to eurozone summits at least once a year. However, the invites would be restricted to non-euro countries that not only signed and ratified the agreement, but also "declared their intention to be bound by some of its provisions."
Sounds like a tricky trade-off: the Poles are unlikely to take too kindly to having to institute the eurozone fiscal rules before they've joined the euro...